Solo 401(k) vs SEP IRA Calculator
See how much you can put into each plan for 2026. Enter your net profit and self-employment tax, and the calculator shows both limits, the split behind the Solo 401(k) number, and which plan gives you more room.
Your numbers
1. Profit and self-employment tax
2. Age and deferral
Your results
Which plan allows more
Enter your numbers and press Calculate.
SEP IRA maximum
20 percent of earnings after half your SE tax, capped at $72,000.
Solo 401(k) maximum
Employee deferral plus employer contribution plus catch-up.
The difference
Contribution room, not tax saved.
Your Solo 401(k) split
How the numbers were worked out
How the two plans differ
Both plans let a self-employed person put money away before tax. The difference is where the money is allowed to come from.
A SEP IRA has one contribution type. You contribute as the employer, and the amount is a percentage of what you earn. No profit means no contribution. Modest profit means a modest contribution, no matter how much of it you would happily save.
A Solo 401(k) has two. You contribute as the employee, out of your earnings, up to a flat dollar limit that does not depend on how profitable the year was. Then you contribute again as the employer, using the same percentage a SEP uses.
That second contribution type is the whole story. It is why the Solo 401(k) allows more for almost everyone reading this page, and it is why the gap between the two plans is worth exactly the size of the employee deferral until your income gets high enough for the overall ceiling to take over.
Deadlines, for a sole proprietor with no employees
This part is scope-sensitive, so read it as applying only to someone who owns the entire interest in an unincorporated business and is its only employee. That is who this calculator is for.
A SEP IRA can be established and funded up to the due date of your return including extensions.
A Solo 401(k) used to require the plan to exist before year end if you wanted to make employee deferrals at all. SECURE 2.0 changed that for people in exactly your position. If you own the whole business and have no employees, you can adopt a new 401(k) after the tax year has ended and, for the first year only, elect to defer the prior year's net earnings as late as the due date of your individual return, determined without regard to extensions.
Two things to hold on to. The extra time is first-year only. From the second year onward the ordinary rule returns and your deferral election has to be in place before the year ends. And unlike the SEP, filing an extension does not buy you more time for that deferral election.
Authority: IRC section 401(b)(2), as amended by section 317 of the SECURE 2.0 Act. The IRS sets it out in its Issue Snapshot on the deductibility of employer contributions to a 401(k) plan made after the end of the tax year.
If you are reading this late in the year, that timing may matter to you more than the contribution limits do.
The 20 percent rule
Nearly every article on this subject says the employer contribution is 25 percent. Nearly every self-employed person who does that arithmetic gets the wrong number.
Here is why. The 25 percent is 25 percent of your compensation, and for someone who is self-employed, compensation is not your Schedule C profit. The IRS defines it as your net earnings from self-employment reduced by two things:
- the deductible portion of your self-employment tax, which is half of it, and
- the retirement plan contribution you are making for yourself.
Read that second one again. Your contribution depends on your compensation, and your compensation depends on your contribution. The IRS acknowledges this openly, describing it as a circular calculation.
The way out is a reduced rate. The IRS gives the conversion in three steps: take the plan contribution rate, divide it by 100 percent plus that rate, and use the result.
For a 25 percent plan:
25% / (100% + 25%) = 25 / 125 = 20%So the employer contribution is 20 percent of your net earnings after subtracting half your self-employment tax. Not 25 percent of your profit. On $80,000 of profit that is the difference between a $20,000 contribution you cannot legally make and the $14,869.64 you can.
The IRS supplies a way to check any answer, and this calculator runs it on every result:
(net profit - half your SE tax - your contribution) x 25% = your contributionIf those two sides do not match, the contribution figure is wrong.
2026 contribution limits
| Limit | 2026 amount |
|---|---|
| Employee deferral, Solo 401(k) | $24,500 |
| Total employee plus employer, either plan | $72,000 |
| Catch-up, age 50 to 59 and 64 or older | $8,000 |
| Catch-up, age 60 to 63 | $11,250 |
| Employer contribution rate | 20% of net earnings after half SE tax |
| Compensation ceiling | $360,000 |
All figures come from IRS Notice 2025-67.
The $72,000 is a combined ceiling. It caps the SEP contribution on its own, and it caps the employee deferral plus employer contribution in a Solo 401(k) taken together.
Catch-up contributions
If you reach age 50 or older during the year, a Solo 401(k) lets you add a catch-up contribution on top of everything else. In 2026 that is $8,000, or $11,250 if you turn 60, 61, 62 or 63 during the year. The higher amount replaces the $8,000 rather than adding to it, and it drops back to $8,000 at 64.
Two points that are routinely got wrong:
The catch-up sits outside the $72,000, not inside it. The regulation is explicit that catch-up contributions are not counted when applying the section 415(c) limit. So a 55-year-old with enough profit can reach $80,000, and a 61-year-old can reach $83,250.
A SEP IRA has no catch-up at all. Catch-up contributions are a feature of elective deferrals, and a SEP has none. Age changes nothing about a SEP contribution. This is the single largest source of the difference between the two plans for anyone over 50.
There is one more limit on the catch-up that most calculators miss. It cannot exceed what is left of your earnings after your regular deferral. If your earnings after half your SE tax are $27,880.57 and you defer $24,500, only $3,380.57 remains, and that is your catch-up ceiling that year regardless of your age.
Which plan allows more
For most self-employed people, the Solo 401(k) allows more. The pattern is consistent enough to describe precisely.
At low and middle profit, the Solo 401(k) leads by exactly the employee deferral. Both plans compute the same employer contribution from the same base, and the Solo 401(k) adds the deferral on top. At $30,000 of profit and at $150,000 of profit, the gap is the same $24,500.
At high profit, the gap closes. Once your earnings after half your SE tax pass roughly $237,500, the Solo 401(k) hits the $72,000 ceiling and stops growing. The SEP keeps climbing until it reaches $72,000 too. Between those two points the advantage shrinks from $24,500 to nothing.
Over 50, the Solo 401(k) pulls ahead again and stays ahead, because the catch-up sits above the ceiling and the SEP has no equivalent.
The SEP still has arguments in its favour. It is simpler to run, has no annual filing obligation until the balance gets large, and can be set up after year end. If your profit is high enough that both plans reach $72,000 and you are under 50, the SEP gives you the same result with less administration.
Reading your results
SEP IRA maximum is 20 percent of your net earnings after half your SE tax, capped at $72,000.
Solo 401(k) maximum is your employee deferral, plus the employer contribution, plus any catch-up. The first two together cannot exceed $72,000. The catch-up is added afterwards and is not subject to that ceiling.
Your Solo 401(k) split shows the three components separately, because they have different rules, different deadlines and, if you ever add employees, very different consequences.
The difference is what one plan allows you that the other does not. It is not a tax saving and it is not a projection of growth. It is contribution room.
If you enter a smaller employee deferral than the maximum, the employer contribution does not change. Your unused deferral room does not transfer to the employer side. It simply goes unused.
Common mistakes
Using 25 percent of profit. The rate for a self-employed owner is 20 percent, and it applies to earnings after half your SE tax, not to Schedule C profit. This is the most common error on this subject by a wide margin.
Forgetting to subtract half the self-employment tax. Skipping this step alone overstates the contribution by several percent.
Deducting the contribution on Schedule C. Your own contribution is deducted on Form 1040, Schedule 1, on the line for self-employed SEP, SIMPLE and qualified plans. It does not go on Schedule C. Putting it there is a mistake the IRS specifically calls out, and correcting it means amending the return.
Assuming a SEP has a catch-up. It does not.
Assuming the catch-up counts toward the $72,000. It does not.
Applying these numbers to an S-corp. This calculator is for unincorporated self-employment. If you take a W-2 salary from your own S-corp, the rules and the arithmetic are different, and this page will not give you the right answer.
Worked examples
Every figure below is produced by the same engine that powers the calculator.
Example 1: freelancer at $30,000 profit, age 40
Self-employment tax is $4,238.87, so earnings after half of it are $27,880.57.
- SEP IRA: 20 percent of $27,880.57 = $5,576.11
- Solo 401(k): $24,500 deferral plus $5,576.11 employer = $30,076.11
- Difference: $24,500.00
The SEP allows just over five and a half thousand. The Solo 401(k) allows more than the entire profit-based amount five times over, because the deferral does not care what the profit was.
Example 2: established sole proprietor at $80,000 profit, age 40
Self-employment tax is $11,303.64, so earnings after half of it are $74,348.18.
- SEP IRA: $14,869.64
- Solo 401(k): $24,500 plus $14,869.64 = $39,369.64
- Difference: $24,500.00
Same gap as Example 1, on nearly three times the profit. That is the point.
Example 3: the same $80,000, at age 61
- SEP IRA: $14,869.64, unchanged, because age does nothing to a SEP
- Solo 401(k): $24,500 plus $14,869.64 plus $11,250 catch-up = $50,619.64
- Difference: $35,750.00
Example 4: high earner at $150,000 profit, age 40
Earnings after half SE tax are $139,402.84.
- SEP IRA: $27,880.57
- Solo 401(k): $24,500 plus $27,880.57 = $52,380.57
- Difference: $24,500.00
Still $24,500. The ceiling has not started binding yet.
Frequently asked questions
It is possible, but it rarely helps. The $72,000 annual additions limit applies across both plans of the same business, so opening a second plan does not create more room. It creates more paperwork.
No. It is built for sole proprietors and single-member LLCs taxed as sole proprietors. If you pay yourself W-2 wages through an S-corp, the calculation runs off your wages instead of your net profit and the answers here will not apply.
Both plans can cover a spouse who genuinely works in the business, which can substantially increase total household contributions. This calculator models one person. Work out each person separately, or talk to your accountant.
Form 1040, Schedule 1, on the line for self-employed SEP, SIMPLE and qualified plans. Not Schedule C.
A good estimate gets you close. Because only half the SE tax comes off, an error of a few hundred dollars in your SE tax moves the contribution by tens of dollars. Use the Self-Employed Tax Estimator if you want a firmer number.
No. This calculator shows contribution capacity only. What that is worth to you depends on your marginal rate, which is a separate question.
Yes. Every limit on this page comes from IRS Notice 2025-67, which sets the 2026 amounts.
Disclaimers
This calculator is for information only and is not tax advice. It covers unincorporated self-employment: sole proprietors and single-member LLCs taxed as sole proprietors. It does not cover S-corps, partnerships, businesses with employees other than a spouse, or anyone with a retirement plan through another employer, any of which can change the result.
Contribution limits shown are for tax year 2026 and come from IRS Notice 2025-67. Limits are adjusted annually. Confirm your own figures with a qualified tax professional before contributing.